Business & Finance
Economists and business leaders debate whether U.S. economy is K-, C-, or E-shaped
Experts and corporate executives disagree on whether post-pandemic inequality persists, is narrowing, or has settled into three distinct income tiers.
The short version
- Economic experts, politicians, and corporate executives are debating whether the U.S. economy remains in a K-shaped recovery or has shifted into a C- or E-shape.
- Treasury Secretary Scott Bessent and some corporate leaders contend a C-shape is forming as middle- and lower-income earners gain ground due to wage growth and tax policy.
- Other economists and consumer brand executives argue high living costs, energy prices, and near-record credit card debt show the K-shaped divergence remains active.
- Uncertainty remains over whether middle-class spending gains will endure amidst ongoing inflation risks linked to conflict in the Middle East.
Key facts
- Treasury Secretary Scott Bessent claimed the K-shaped economy has ended and is being replaced by a C-shaped economy due to lower-income wage growth and tax policies.[CNBC]
- Executives at Colgate-Palmolive, Lowe's, and Constellation Brands maintained that a K-shaped economy continues to characterize consumer spending trends.[CNBC]
- According to the University of Michigan survey, U.S. consumer sentiment dropped 11% in August compared to the prior year.[CNBC]
- New York Fed research showed combined U.S. credit card balances reached a near-record $1.26 trillion in the second quarter.[CNBC]
- Analysts at Bank of America Institute reported that the credit card spending gap between high earners and other income tiers began narrowing in May.[CNBC]
- Some analysts, including Navy Federal Credit Union chief economist Heather Long, suggested an E-shaped framework better represents three parallel, unequal income classes.[CNBC]
What remains uncertain
- Former JPMorgan chief economist Anthony Chan noted that elevated gas prices driven by U.S. conflict with Iran could undercut low-income gains, making it unclear if convergence will hold.[CNBC]